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Record Retention Obligations: Acing The Audit

By Joseph R. Marconi & Brian C. LangsJohnson & Bell, Ltd.Chicago

Lawyers have traditionally created a great deal of paper. The amount of information kept on paper has been reduced as lawyers have been pulled into the electronic era by their more advanced clients. In this new era, the prevalence and sheer amount of electronic data created and received by lawyers can be absolutely overwhelming. Does a lawyer have a responsibility to preserve all this tangible and virtual clutter after a file has been closed? If so, for how long and at what cost? This article addresses the paper and electronic files that must be retained by a firm or small practice for some period of time under the law.

Client Contacts and Attorney Financials.

Pursuant to Illinois Supreme Court Rule 769, every attorney has a duty to retain certain limited records for a minimum of seven years after the records are created. These records include (1) the name and last known address of each of the attorney’s clients, (2) record of whether the attorney’s representation of that client is ongoing or concluded, and (3) all financial records related to the attorney’s practice. With regard to financial records, Rule 769 specifically requires attorneys to retain bank statements, time and billing records, checks, check stubs, journals, ledgers, audits, financial statements, tax returns and tax reports from the past seven years. The Rule allows an attorney to maintain original, copies, or computer-generated images of these records. However, the Committee Comment to Rule 769 notes that while maintaining required records using certain electronic media, such as CDs and DVDs, may save space and reduce cost without increasing the risk of premature destruction, certain other storage media, such as floppy disks, tapes, hard drives, zip drives, and other magnetic media are not sufficient to meet the requirements of Rule 769 because they have normal life spans of less than seven years.

Records of Client Trust Account Funds.

Rule 1.15(a) of the Illinois Rules of Professional Conduct[1] also requires lawyers in Illinois to retain complete records of client trust account funds and any other client property previously safeguarded by an attorney. These records must be retained for a period of seven years after termination of the client’s representation. Like Illinois Supreme Court Rule 769, Rule 1.15(a) allows these records to be maintained in electronic form, but only if printed copies can be produced and the records are readily accessible to the lawyer. Rule 1.15(a) was recently amended in July 2011 to include detailed specifics regarding the types of files that must be retained and the correct procedure for adherence.[2]

Other Records and Files.

Although the record retention procedures required by the rules above should be viewed as mandatory for lawyers practicing in Illinois, they are limited in scope, and there are number of scenarios that these rules do not directly address. The Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois (“ARDC”) provides some limited advice. According to the ARDC, for records not covered under Rule 769 or Rule 1.15,[3]
there are no rules that specifically cover how long a lawyer must keep records contained in a client’s file (unless the lawyer has been disciplined and the duties of Supreme Court Rule 764 would apply). Upon termination of the representation, the lawyer is required to return all papers and property received from the client (Rules 1.15(d) and 1.16(d)). For other records, the lawyer should exercise prudent judgment in determining how long to retain the client file, taking into consideration such things as when the statute of limitations for legal malpractice has expired, any particular difficulties in the relationship with the client or the representation, if the client was a minor or incompetent that might extend the period of limitations, whether the file contains any original documents that the client might want back, and whether any documents if destroyed would be difficult to reconstruct from other sources.[4]

The prudent lawyer should always err on the side of caution when deciding whether to destroy client files or records, especially considering the wide availability of reliable, cost-effective electronic file storage options.

[1] For a more detailed discussion regarding compliance with Rule 1.15(a) under a specific set of circumstances, see Illinois State Bar Association Advisory Opinion on Professional Conduct No. 01-02 (July 2001) (destruction of client file after client failure to retrieve file with 30 day notice likely failed compliance).

[2] Amended Rule 1.15(a) of the Illinois Rules of Professional Conduct lays out the exact procedures and types of files that must be retained in painstaking detail. A link to the current version of Rule 1.15(a) can be found at the following internet address: http://www.state.il.us/court/SupremeCourt/Rules/Art_VIII/default_NEW.asp (last visited November 12, 2014).

[3] The ARDC also references Rule 756(e), which requires an attorney to maintain records of malpractice insurance reported to the ARDC as part of the attorney registration process for a period of seven years from the date that coverage is reported.